Morgan Stanley (MS) Earnings Call Transcript & Summary

Well, good morning, and I'm delighted to welcome Franck Petitgas, Head of Morgan Stanley International, a role in which he oversees all of the Morgan Stanley's business outside of the U.S. So Franck, thank you very much for being with us today.

Good morning. Thank you, Magdalena. Good pleasure.

And before we start, let me just read a quick disclaimer here. So this discussion may include forward-looking statements, which reflect Morgan Stanley's management's current estimates and subject to risks and uncertainties that may cause actual results to differ materially. Morgan Stanley does not undertake to update the forward-looking statements. This discussion, which is copyrighted by Morgan Stanley and may not be duplicated or reproduced without their consent, is not an offer by any security. Okay. So we're done with that.

So Franck, let's start our discussion with Europe. The -- and the European macro environment and the economic kind of outlook on recovery. How do you assess the current environment?

Well, Magdalena, I mean, it's easy to say that it's a great backdrop for our business and investment banks in general on Wall Street. I think the environment is very good. We are seeing a V-shaped recovery globally. GDP -- we forecast GDP to be on a path of pre-COVID by pretty much the next quarter on a global basis, obviously helped by Asia and the U.S. in particular. The vaccines are obviously on the way up, case counts on the way down. Our commodity policies continue. And of course, I heard yesterday that, I think we've just stated, you said that we're looking forward to starting back to roaring 20s. So there is definitely a psychology that is positive in terms of people want to come out and live a real life. I think when you look at the EU or Europe, in particular, and I'll make a difference with the EU and the U.K. on this -- when you talk about Europe, not because of Brexit just because of somebody at a different position. I think it is no question when you look at Europe, there is a little bit of a decoupling between Europe and the U.S. in the sense that we forecast the pre-COVID recovery to be more Q1 of next year. So a slightly slower recovery than it is on a global basis, more like a W rather than a V shape. And that is because the vaccine strategy is going to be -- vaccines implementation is going to be slower. Also that the stimulus, which has been -- certainly being seen to be very positive as a sign of integration within Europe, is also more focused on investment around the climate transition, digital transitions, perhaps more than just outright fiscal stimulus that we see in the U.S. or even in the U.K. And of course, the -- on a seasonal basis, depending on how the vaccine strategy is -- how effective that strategy is, there's no question that for summer in Europe, the summer is very important. So vaccines at that point, we will see, but it may be that, that's unhelpful. So the positive, however, of course, if vaccines are happening, case counts will go down eventually, and also the first derivative of the recovery for Europe has allies with its export sector. So there's no question that Europe will benefit. As a result, it will come out of this decline fast. The U.K. versus Europe, despite, obviously, well known, more successful vaccine strategy, the U.K. is probably going to recover actually a little slower than the Europe, the EU and the continent, probably more like Q2 of next year than Q1 for pre-COVID. And that is because actually, the U.K. had a -- has a sharper drop of GDP in 2020, down 10%. Europe was minus 7% and the U.S. minus 3.5%. So there's a slightly deeper hole to come out. Having said that, all the signs look positive. And certainly, the recent fiscal stimulus in the U.K., I think, will half.

Perfect. Thanks very much for that. And Franck, how can you kind of assess the Morgan Stanley's European business within the global context against industry trends and so forth. You've given us a very good kind of description of the background, but how we're doing against it?

Yes. Well, first of all, let me say, in the last 12 months, the focus has been, obviously, on the safety and efficiency of our employees, and I think we found great -- we're on ways to use technology extremely effectively. Two is the resiliency for our clients, and I think we've passed the test. Resiliency has been very, very good despite enormous volumes and a lot of people at home. And then lastly, performance for shareholders. So it's been a remarkable year for the firm, $48 billion revenues, $11 billion of net income, 2 acquisitions, credit upgrades, and of course, it's -- in a way, it vindicates the strategy and all the efforts we've made to the transformation of the firm in the last 10 years. Balance business globally. So obviously, we've been able to tap into the group in Asia last year, in particular. And also balanced between businesses between the wealth business and the investment -- wealth and asset management and the integrated investment bank. Now turning to Europe and how Europe fairs in all this, we have critical mass in Europe. We have a leading franchise, $6.4 billion of revenue last year, 14% of firm revenues. It's actually higher than that as a percentage for the investment bank, given that investment bank really is the mainstay of our European business. And in the 14%, denominator obviously includes a very large wealth management business in the U.S. So it gives you a sense of the importance of Europe to our global franchise. The second point is -- on Europe is, we've been in Europe for 50 years or more. We celebrated a lot of anniversaries recently in the last 2 or 3 years. And so we've got longevity, longevity of our talent, longevity of our presence, longevity in our client relationships, which lead to leading shares in all our lines of business. And I would say, very much synchronous with the leadership we have in these businesses globally. So be it a leader in the IPO business, leader in M&A, are in line with our #1 position in equity, sales and trading and research. And of course, we've also reshaped the business in fixed income, and we're seeing great share gains in the fixed income businesses. Lastly, as you know, we don't have a wealth management business anymore in Europe, but we do have a very thriving and growing asset management business. And actually, investment management Europe is very important to investment management as it represents about 40% -- or represented 40% of gross inflows in that business, testimony of, obviously, good distribution, but also testimony of the interest that European investors have for our products as well as the important pool of savings that exist in Europe. And as you know, we closed Eaton Vance, March 1, and we're really excited of leveraging our international distribution, European distribution for the COVID and of course parametric, help parametric businesses, which I think will be extremely interesting to attractive to investors here.

Of course. And we wouldn't kind of have a European discussion also without a discussion of Brexit, of course. And would you kind of give us a sense of the context of our operations, potential impact on the U.K. and kind of European growth, relative attractiveness of the business as you see it? What's our commitment to the continent? Where do you kind of sit in the -- in also the debate from a perspective of financial industry and how it's kind of got treated within the Brexit negotiations overall? I know a lot of things, but...

Yes. Well, yes, I mean, it's -- as we say, and we live in U.K., the B word that now has been forbidded in a dinner party, right, at dinner table or no longer dinner parties, it's only family dinners. But I think we've -- at Morgan Stanley, we've held a consistent line for the last several years and well into Brexit, which is, we were ready -- well, we made sure we were ready for any eventuality. And indeed, the transition earlier this year, or late last year, passed without a hitch for our clients, for our systems, et cetera. And so the second thing is we are committed to, as I said before, right, we've been here a long time. We're committed to the U.K., we're committed to Europe in general. So being present on the continent for over 30 years. I think we've actually been in France for 50 years. And we have made further investments in talent, in headcount, the senior talent in headcount, in Frankfurt and Paris, in particular, but also across other offices around -- across Europe. And we have been present in Milan, in Madrid and Stockholm, et cetera, for -- as I said, for a long, long time. So it's more a question of investing in those even more as we go, obviously, because we have to be close to our clients and as regulations evolve. And of course, London will remain our headquarters for Europe. Now no doubt, as you said, no doubt that these changes imply greater costs, be it in terms of capital commitment. People, infrastructure, to some degree and movements of people. But I -- and we are very confident despite all of this, about, I would say, 2 things, one for the EU and one for the U.K. The first 1 is, we're very confident about the EU's transformation, future transformation, ongoing transformation and integration. I think, of course, the $750 billion in fund -- pandemic fund is a great example or symbol of this. And also, we are confident that will lead to more business. And also, we're confident about continuing to gain share in Europe, which is something that we've been doing for the last several years on a consistent basis. The wallet share in Europe grows slowly, but our share also has grown -- so the convexity between those 2 has actually been attractive. The second thing on U.K., a U.K. post-Brexit, I think will be a vibrant economy. And the city will continue playing or has to continue playing its key role in global capital markets. Now turning to the EU and what you just said about the negotiations or the MoU and financial services and how they may impact the businesses for -- in the capital markets. I -- first of all, I think we already, again, for any eventuality out of this. So we're not worried. I think what 1 could be worried more as a macro picture is that it is indeed easy to be skeptical and Cassandra like about the whole debate about the city and these things. But there is indeed a risk that the -- in a way that the U.K. -- some of the U.K. losses may not be the EU's gains, it maybe that the communicating vases do not communicate. And I think that's obviously a risk that you get a lose, lose. And that -- and the reason for that risk is because absent the capital markets union and banking union for now, and a slightly underdeveloped pension fund industry on the continent, the EU is not yet in a position to replace some of the important functions that London -- in the city of London performs in the allocation of capital around Europe. And so that's very important. But I'm hopeful that both sides will see the benefit of keeping the markets open, working well and efficiently and avoid market fragmentation. I think the biggest risk we have is market fragmentation. And that would benefit nobody, at least nobody in this time zone. Market fragmentation might benefit others, but not in Europe. So I think that's the conundrum. I think there is a path where though the U.K. and EU win and has to be worked carefully.

And Franck, just to pick up on what you've just said, of course, there is still a -- for our industry. There is still a question of kind of unfinished capital markets union. And of course, a big, big deal of the kind of lack of diversification of kind of financials kind of -- yes, well, finance sources, which are still dominated by the banks. So of course, we're kind of hoping for the reform to kind of to deepen the markets. But as you're saying, avoid unnecessary fragmentation. How still relevant or how important the finalization of the CMUO is for us and for the industry?

Yes. Well, I think it's extremely important. And perhaps to put this in context, I've mentioned this before, but let me repeat it. I think it's the strong EU response to the pandemic and the crisis, I think does bode well for the integration and viability in the future of the whole EU project. I think it's really important to state that upfront. I think the recovery fund is more than just euros, it's also very important symbol. And I think I put this in context because the capital markets union will need political will. And so that level of integration, I think, is an important step. The second point I'd make is the banking system, you've heard it or we're hearing it at this conference, is obviously much better capitalized and much more healthy, if anything, I think quite, at times, I think, quite optimistic and positive that I've heard at these yesterday than it was certainly in the great financial crisis. So the European banking system doesn't feel like crisis. So that's important too. Now, however, and of course, nothing is perfect here, banks, despite their good health or their better health, are not enough to -- as a mechanism to deploy capital around the economy, at least in this modern economy. And you need the Capital Markets, you need deep Capital Markets to create that efficiency. And there's no question in Europe, we still have a lot bit of a lopsided system where the estimates vary, but to make it simple, about 2/3 probably of the financing goes through banks and 1/3 capital markets. Whereas in the U.S., it's probably even more strike probably we had a quarter and 3 quarters. And of course, the banks participate in the Capital Markets. So that difference in the way that the economy is financed is -- has a very important impact in this conversation about capital markets union. And I think that's particularly relevant because the savings in Europe are probably not getting the adequate return they're looking for because the capital markets are not open enough and not diversified enough and obviously not deep enough. So the Capital Markets union, in that context, you can see, it's perhaps not the immediate panacea, but you can see how it might address both of these issues. On the one hand, the need to make sure that the economy is not there only by banks to make the system more efficient and more open and also hopefully provide for the savings pool an alternative way to accrete capital or accrete returns over time, which is very important, particularly when you have the kind of demographics we have in Europe. And so I think the -- that is the context. And I think with that, I think there really are, in a way, 2 ways or 2 challenges for the Capital Markets union. The first one is you need 1 set of rules, 1 set of regulatory sort of framework, not 27. So that, again, my point, and as I said at the beginning, you need to put your will to do that. And the second 1 is, if you want to create Capital Markets union, you need a union of Capital Markets. So let me remind you, Capital Markets need both markets and capital. So markets, you might get it through unification of the rules, but you still need the capital, and whereas capital, the question is, can there be more capital? And I think then you go back to the pension fund industry. You need -- we need to have great incentives built in to build a more -- a deeper pension fund. It's happening. It's happening slowly. And you can see it in Northern Europe where is it in Norway -- sorry, in Denmark and other places, it's clearly happening. But hopefully, will happen beyond those. And that will provide the right bedrock to finance the economy once you've got a union. So great program, optimism, blueprint, but requires work and the political will.

No, absolutely. Absolutely. And of course, we have kind of -- we have seen the -- how the process has kind of worked. So far we see progress. And then there is a bit of a paused progress and the pause we'll see how it goes from here. Franck, let's move to Asia. Of course, yesterday also, there were a few of the kind of global banks made kind of quite positive comments from the perspective of opportunity. Now could you give us a sense the context for our strategy there, our business across Asia and what are our kind of expectations from now?

Yes. I mean look, the context is, without repeating what people have said probably is that you have both on a cyclical basis, a very sharp recovery in Asia, particularly in China. And that's because the 2020 impact was probably slightly smaller. In Chinese economy, I think we're at 2% last year. So think about the declines in Europe and the U.S. and U.K., obviously, it's 2% -- only 2% when it normally grows at much higher rates, but we expect that already in 2021, it's growing at 9%. So partly, first-in first-out and also a very efficient management of the pandemic. The second, which is more structural, is what we've been observing, which is massive capital formation in that part of the world. And that's driven off, obviously, very high growth in GDP across the region. And also, obviously, the step change function arising from the digital -- embracing the digital transition, the digital revolution. And of there, you have new companies being spun off and new businesses being created, et cetera. So you've got a virtuous factory circle, which is why everyone talks about Asia, which is you have capital formation, new companies coming off of the market, monetizing or realizing the capital, redeploying that capital. And of course, for investment banks, that is a virtuous circle where you advise you on the right, you raise capital, you obviously help strategically on M&A. And we also have in -- well, obviously, in Asia, we have in line with the rest of the world, we have our investment bank, which is capturing that growth opportunity, but also we have a fast-growing private banking business there, which is also connected in -- within that ecosystem. So -- and of course, the private flow, the institutional flows, the foreign flows into the region have been very high, attracted by the higher growth rates and attracted by these new companies that are coming to market. So it's been a very healthy environment to do business, and indeed, the business has been -- or we've been able to capture that, and we have leading shares in all these products, pretty much like in Europe in terms of leader in IPO, leader in M&A, leader in equities and sales and trading and investments in fixed income. We also have -- we'll talk more on to this, if you want, but we also have a -- as I said, a very -- a thriving private banking business and also very focused on our asset management opportunity in the region, given the interest that -- given the capital formation, we see capital coming out of the region interested in investing abroad, but also we see a lot of interest in foreign capital wishing to invest in the region through our products. Now the demand. As I said, the demand for wealth and asset management services is going to grow at rates that will outpace Europe and the U.S. over the next few year, there's no question. We're talking about, I think McKinsey is suggesting that asset management demand -- sorry, institutional market for asset management will grow somewhere between from $4 trillion to $7 trillion in this period of 5 to 6 years. So we're talking about very fast rates as capital is formed, but also you have a deeper penetration of the financial markets into GDP into the economy. So I think this is a tremendous opportunity for investment banks. So I think for Morgan Stanley, we're extremely well positioned because we're very present across the region for a long time.

Yes. Absolutely. Franck, why don't we kind of do, kind of go a little bit into detail from a perspective of wealth. Because, of course, as you said, fast growing, very strong, we're kind of very important business for us across Asia, but kind of headquartered in Hong Kong. How has this been developing for us over the last couple of years?

The -- so we have in Hong Kong, really catering to offshore clients, private banking business, which has been growing extremely well. We have -- we cater effectively to the entrepreneurs. So it's a mix of existing clients, but also a number of new clients that come out of these -- who realize their wealth through the IPOs and for other whole sales of assets. And we have a very integrated model where our private banking team works hand-in-hand with the investment bank. So this has been a positive, a very positive gradient business. And it's not just -- it's a lot of Chinese money, but also from elsewhere in the region. So certainly a business we are putting a lot of effort in to build further.

Perfect. And Franck, let's move on to onshore China. Because, of course, the last couple of years have kind of seen a very kind of serious reforms, reopening kind of opening of the onshore market as well. How are we taking part?

Yes. I mean, look, you're right, we didn't talk about onshore. In a way, everything I've said to you about the business in the private banking, but also the IPO business and our investment banking business has been -- and sales and trading is to a large degree, offshore. I mean we are -- in the onshore business in China, we are -- we've made the investments. We have the foundation. We think that the medium-term opportunity in onshore China is probably 1 of the largest to wrap, just because of continued asset of capital formation in -- on Mainland, the development of savings, or probably the savings pool is huge, but also the institutionalization of that savings pool, the demand for savings products as the demography is also a cause for that, and the size of the economy. So there's no question that the onshore business will grow, and indeed, we've seen it in the Asia market. And we have already intermediated a lot of the flows -- foreign flows into China. We estimate that the Asia market is probably owned about 10% by foreigners. So we are -- we've been a big player indirectly in the onshore market. But having said that, to -- what you're really asking is when will we have a much larger share of the onshore business? And I think that's going to take time. This is subject to getting the right licenses and authorizations. I think we have -- we have more than the foundation. We have -- the building is there. We have ownership and control of our businesses in asset management. And we have a bank, and we have obviously also an investment bank business there. So we have the people, we have the assets, but it will take a bit of time for this to bed down. So we're very well positioned to leverage the growth footprint. We're very well positioned to leverage what we've already done out of the offshore business. And we have the infrastructure and the people on the onshore. I think it will grow as with the pace of familiarization and authorizations. So positive, but I would say it's more medium-term than short-term, and it takes more time. Short-term, I think we'll continue to see an enormous amount of interest in the Asia market. And all of this will obviously spills over into the offshore and what we out of Hong Kong and Singapore.

Yes. No, no, absolutely. So let's kind of round off the Asian conversation with Japan. Because, of course, we've got our kind of unique partnership with FUMG -- MUFG, sorry. And also, there are quite a lot of kind of opportunities from the perspective of wealth and the investment bank kind of as well how do you see -- yes, how do you see Japan?

Yes. So Japan is a strategic hub for Morgan Stanley. We've been present there for, I think, 50 years. And the last 10 years, we also enjoyed a very strong and strategic alliance with, as you said, with MUFG. So I think we're very fortunate that with MUFG, we have the leading position in what is the third largest economy in the world. It has obviously an enormous goals of savings. The demographics that go with that so a need to -- for savings products and wealth management products and as well as a very deep and sophisticated capital market. So it's no question that the fundamentals are very, very interesting. And there is -- things have changed also in Japan. Japan has always been renowned for the productivity and for the leadership of its corporates and -- but more recently, there has been cause for change in governance in corporate Japan and that's led to also change in corporate activity, rising M&A, even hostile M&A sometimes. Private equity interest around the world is -- has risen in tandem, and a lot of the largest private equity complexes and offices in Japan and sort of investing in Japan. I've also observed, because I go there quite a bit, not in the last 12 months, I should say, but typically, I've observed a flourishing venture capital seen technology, innovation, perhaps things are not always associated with Japan. So I think Japan is opening up in that sense. And so that makes it interesting and attractive to international investors, be it private equity, VC investors, but also the institutional market. And so we've seen renewed international investor interest. And of course, we've been intermediating a lot of these dialogues, be it in investment banking or in sales and trading with our partner in Japan. And so the -- so that really -- so that's the context, so that sort of partnership we have with MUFG, which is that we leverage on each other's strengths, which means that in Japan, we're clearly the leading firm across all the lines of activities. And obviously, also, that partnership has helped us and strengthened our global footprint and theirs. And particularly in the provision of very large capital commitments around events, around event financings, around the world for our clients. A combination of both funds is our rival. There's no question. So that's also been a positive nonJapanese derivative of what we do there. In terms of the wealth, you talked about, yes, there is definitely, as I said, a huge opportunity there. We're working with our partner on a number of initiatives. They have -- they obviously have a business, and we see how we can -- as we do always, with our partner, how we can pool our knowledge, our resources, our intelligence, our technology to improve the -- our position in the market.

Perfect. Thank you, Franck. So let's kind of -- we've talked about kind of various parts. But let's kind of talk about the overall international business within Morgan Stanley. How do you see it fitting with the overall kind of business strategy of the firm? Because right in the beginning, you've kind of described, we have reshaped our model quite dramatically over the last couple of years. And of course, last year, we've been very busy, too. So how do you see the kind of the acquisitions of E-Trade and Eaton Vance, where a testament to that shift in the strategic direction? And how does it translate into the ex U.S. business?

Yes. So you're right. And maybe that's useful as context. You're right, this last year was remarkable because it was a year where in a way, it was remarkable -- it was on an accident in a way it was remarkable because it sort of indicated all the reshaping we did in terms of rebalancing the firm to the investment bank and wealth and asset management. So that's worked out very well. That was a 10-year sort of effort. Also, we reinforced it with the acquisitions of E-Trade which it goes to the wealth management team. And then of course, Eaton Vance and IM. How does it -- what's the implication for international? Now just putting in context, the international business is -- it represents about 30% of firm revenues, okay? The mainstay of the international business is the integrated investment bank. So we call it ISG here, but it's the investment bank. There is obviously -- outside of the U.S. IM, as I said, investment management does rely on for its distribution on certainly in Europe and other non-U.S. capital. And of course, wealth management is much less developed outside the U.S. than it is in the U.S. We have the #1 wealth management complex in the world, but it's really a U.S. business. We do have private banking, very thriving private bank, as I mentioned, in Asia and in Latin America, which I didn't talk about, which is very similar to the Asia business. It's also an offshore business, and it's about the same size. These are relatively large businesses. But obviously, they are not very -- they're modest compared to the size. They do it by the size of our wealth management in the U.S. So the -- so as we discussed, clearly, there is a group opportunity here to harness we discussed in Asia, what we discussed in Asia, in particular, the growth in asset and wealth management markets. So if you think that we are not so indexed to those regions, that's clearly an opportunity given the fact we're so strong globally but outside from a U.S. base. And secondly, it's also -- we're not starting from scratch in the sense that these regions were really a leader in the investment bank. So we have a great trampoline. We have a great so springboard to help us capture this growth opportunity. So -- and the thrust really is to capture the growth between IM and wealth in places like Asia and other growth markets, Latin America, too, and to some degree, Europe selectively. And in that process, we will also continue rebalancing as a firm as we index more some of the wealth and asset management outside the U.S. So we'll also continue the rebalancing. If you want a bit more detail, I think there are sort of 3 pillars of this. Pillar 1 is the -- and we should not forget this, the continued growth in our -- in the investment bank, which is the core business in investment bank, ISG, not just in Europe, but particularly in Asia. We talked about China medium term, there's obviously an opportunity. But Asia will continue for the foreseeable future. Asia Pac to be an important source of revenue growth for that business, underwriting sales and trading, intermediating capital flows in and out of that region. And I think that's going to be very significant. Secondly, second pillar is, I would say, the digital pillar, you mentioned E-Trade. Clearly, E-Trade is a powerful weapon or at least an asset we have here in the armory to capture mass affluent wealth around the world and particularly in selected markets, growth markets. And so Asia is obviously one, but also we look at Europe. And we're looking at the best ways for us to deploy that technology, that expertise, as I said, in Asia and other parts of the world. The third pillar is how we scale up our international asset management and also our private banking in Latin America and Asia, in particular, but also -- but in particular, international asset management, I mentioned the capital formation in Asia in particular, we will build on the strength of our existing franchise. And there's no question that Eaton Vance in particular is highly complementary to our international business and our ability to distribute products. So in a nutshell, these 3 pillars of ISG growth, in particular Asia, digital transition, E-Trade, mass affluent globally. And thirdly, IM internationally and scaling it up, I think we -- this is all about capturing growth opportunities in these businesses, pivoting to Asia. And as a result, rebalancing -- continue the rebalance of the firm between investment bank, U.S. and the rest of the world and the other wealth and assets. So this is a -- the rebalancing and great growth opportunity from a position of strength.

Yes. Which actually kind of brings me very nicely to a couple of questions from the audience. So it's got almost busy. So my first question is, when you compare yourself with your global peers? What do you think are your kind of key strengths? And on the other hand, also potential opportunities? Well, yes, relative to the peer group? So really, our competitive positioning, Franck, globally how do you assess it?

Well, I mean I can assess in different ways. We have -- we do compete in different areas. So if you think about the investment bank, so the traditional investment bank, investment banking is sales and trading, research, that is -- in that business, I think the crucial ways, what I think we differentiate is that we have a truly global network, where we have -- there are no holes in our matrix. We are in all the key areas that need to be. We have all the key products. We have the talent where it should be. I mean nobody is perfect, but there are no glaring areas where we need to rebuild or build. We have a culture to boot to make sure that, that works together. The global network is -- needs to be fed and needs to be nurtured. And the only way that works is because you have people who work together for a long time. It may sound trite and simple, but it's -- as we say, it's -- it may be simple, but it's not easy. And so I think that's a very important aspect. And we've also made the right investments. We talked about post Brexit, we made the right investment in the right places. We were forward thinking, we were also very early in making the right investments in Asia. We have this phenomenal position in Japan, which also is, I think, is a competitive advantage. So I think it's the brand, it's the people, it's the culture. And it's the trust of clients as a result of this to execute and be innovative. Now I could go further down and highlight -- and also the ability to work together, the culture, the integration of all the different parts of the investment bank. It's not -- we don't do -- I don't think clients hire us to do 1 thing that you typically hire us what they think we're going to be able to find more a solution to a more complex problem, which will mean bringing together different talents to the different parts of the organization. But I think the -- further down, I think we are also -- we have developed the real power allies be it in investment banking in tech and ESG and in health care, which obviously show in the detail was in terms of our results. Or in terms of sales and trading or the leadership we have in technology and the investments we've made. So I think we've been trying to be one step ahead so far. And I think in the other areas, wealth management, we, as I said, we're under-indexed wealth management outside the U.S. So it's -- we certainly compete. I think there, the secret sauce has been that the brand amongst us is very strong. People, as I said, trust the brand. And I think we've been very effective and efficient at connecting that business to our premier investment bank. And so that also has a spillover effect, as I mentioned, we do the IPO for someone that clearly, we may manage their money over time. And in asset management, I think the acquisition of Eaton Vance with parametric and COVID, I think, are true differentiators. And as you know, the performance of the pre-Eaton Vance, but the performance of a number of our funds has been remarkable. So we create a lot of alpha. And we have a differentiated offering of products, and we've had enormous inflows in 2020 and '19 as well. So you asked about the negative, I think, but you didn't?

Yes, there was both. Yes, there were both the positives and negatives. Yes.

I think -- I don't think negative per se. I think like everyone else, we're faced with an exuberant market. And so we have a lot of demands on the firm to respond. And I think we -- I think where we have done a pretty good job and it's on a negative, it's more risk is we have to be constantly aware of making the right decisions in terms of deals we take on or transactions that we take on. I think that's always -- but we are extremely, extremely focused on that. Not to make -- we don't want to make mistakes.

No, absolutely. Absolutely. That's what it's all about, right?

Correct.

Franck, I've got 1 kind of very quick question from the audience also about something that has been a theme at the conference. Of course, the -- by the extraordinary strength of the investment banking over kind of year-to-date. You've mentioned a few things. You've mentioned the IPOs, of course, the ECM markets in general globally are kind of through the roof. Of course, there's a question about where do you stand on stack activity. Could you give us your kind of broad view?

On the investment banking business, more like underwriting and M&A.

Yes. Yes. Yes. Absolutely. Yes.

I think -- look, I think 2020 was the year where it was a year of balance sheet to repair to some degree. I mean if you look at the activity last year, you had, obviously, some M&A, but not very much. And the business were dominated by capital raisings to buttress balance sheets to make sure that you were -- the ships where people -- the ships were watertight and people better than their hatches. So more balance sheet repair. And of course, quite a lot of IPOs and the SPAC sort of SPAC phenomenon starting as well, 2021 is in the late 2020 and '21, have seen a shift in that, which is, I think, probably more M&A in 2021 to expect as companies are looking to scale or buy growth through innovation and trying to accompany this big digital transition, a climate transition that obviously is dominating a lot of the dialogues. I think the balance sheet repair is over the large degree. And so the underwriting is more focused on either refinancings because rates remain low. And so -- and there's a sense, maybe rates will go up. So people obviously manage their funding. And a lot of IPOs. If you look at Europe, in particular, the received wisdom was there's no tech in Europe. Well, I guess what, there's a lot of tech in Europe. It looks to me when I look at the IPO pipeline and the recent IPO business we've done last year. And so there's just -- I think the markets are clearly showing offering a lot of the input for innovation and all these tech companies. I think we got to the SPAC, SPACs I think our new asset class, I think it's an asset cost is going to stay. I think that there's obviously exuberance right now in the market. So inevitably, there's going to be an element of exuberance in that asset class. I think over time, it will -- discipline will come back, and we will -- and the SPACs that will work will be dependent on the quality of the managers. And I think that will be the test. And so we are very focused on that market and also very focused on -- we're being very selective. But I think that's a -- it's sort of a new phenomenon, but it's always existed that entrepreneurs were able to raise capital, either in the private markets or on the public markets. And this one is a bit of a hybrid, it's somewhere in the middle.

Okay. Yes. All right. Well, super, Franck, thank you very much. Thank you for your thoughts, and it's been an absolute pleasure to have you. And of course, thank you for everyone that kind of listened in.

Thank you, Magdalena. Thank you, everyone. Hope to see you next year in real life.

Exactly.